Pre-IPO research – targeting the warheads

Incanthera is a spin-out from the University of Bradford’s Institute of Cancer Therapeutics to exploit development opportunities being generated from this prestigious organisation. Key is a targeted pro-drug delivery platform, to which different cytotoxic warheads can be attached, activated only when enzymes are over-expressed by tumour cells. The specificity of this technology should improve efficacy and lower side effects, to give better patient outcomes. The diversity of applications means that its drugs will address a large segment of the $110bn cancer market. Incanthera will be seeking £4-£10m at IPO to progress three drugs into trials.

• Strategy: Incanthera is a specialist oncology company using a novel pro-drug approach to deliver cytotoxic warheads directly to tumours cells. It intends to develop drugs to a suitable valuation inflection point and then out-licence them for late-stage trials, in return for development milestones and royalties.
• Focus: Incanthera has expertise in developing a pipeline of anti-cancer pro-drugs that deliver cytotoxic warheads directly to the cancer cell environment. ICT01-2588, using a colchicine analogue warhead, has already been out-licensed and is at the regulatory submission stage to start Phase I/II trials in early 2019.
• Valuation: Incanthera has been compared with valuations afforded by stock markets for both UK and global peer groups, and with prices paid by major pharma/biotech to acquire novel oncology assets. The average EV for UK peers is £37.5m, and for global peers is £81.4m, suggesting strong upside potential.
• Risks: Investments in small, early-stage pharmaceutical companies carry a significant risk, and additional capital will be required in the future for further expansion of its clinical programmes. Management intends to undertake an IPO on AIM, but there is no guarantee on timing nor on the quantum of cash raised.
• Investment summary: Incanthera offers a novel approach to the concept of targeted cancer therapy which, when further de-risked, is likely to attract the attention of the majors, especially given management strategy to out-licence its drug candidates, at a suitable time point, for later-stage development. Our cashflow analysis, based on a raise of £7m at IPO with ca.£4m already approved by HMRC for VCT/EIS tax relief, indicates at least a two-year cash runway.